Only Large Policy Interventions Such As Reparations Can Shrink The Racial Wealth Gap
As this presidential campaign season gets under way, the racial wealth gap is getting a fair amount of attention. African-Americans typically have about one-tenth the wealth of whites. Several presidential hopefuls such as former Secretary of Housing and Urban Development Julian Castro as well as Sens. Kamala Harris and Elizabeth Warren have supported the idea of reparations for the descendants of slaves to rectify this massive inequality born out of an unspeakable historic injustice.
A new paper from researchers at the Cleveland Federal Reserve now argues that almost all of the wealth gap between African-Americans and whites is driven by the racial income gap – African-Americans earning about half of what whites earn. One of the main findings of the paper rests on hypothetical scenario that sets African-Americans’ earnings equal to that of whites from 1962 to the present and finds that African-Americans would have had 90% of the wealth of white by 2007. The paper concludes by arguing that addressing the racial wealth gap would require focusing on fixing the racial income gap.
The single focus on income as the driver of racial wealth inequality rests on a model that strips away all of the systematic biases that result in lower incomes for African-Americans. Many of these directly relate to the racial wealth gap and the policy biases that favor whites. After all, income builds wealth, but wealth also generates future incomes and systematic obstacles in building enough wealth hold back African-Americans from getting a fair shot at equal pay. Focusing then only on income ignores the real importance of enacting policies that can quickly close the racial wealth gap, such as reparations.
The racial wealth gap is the result of decades, even centuries of systematic economic barriers to African-Americans’ economic progress . Starting with slavery to the Jim Crow era to today’s mass incarceration, U.S. policy has held back African-Americans and denied them an equal opportunity for centuries. The factors contributing to the racial wealth gap are multitude and their interplay is complex and differs from community to community, from time period to time period. It is virtually impossible to identify one single leading cause for the massive racial wealth gap.
Earning the same money as whites then requires African-Americans to have more wealth to begin with than is currently the case, so that they can actually catch up to whites. After all, current earnings in no small part depend on people’s past opportunities, afforded to them by their families’ wealth. These include, but are not limited to the quality of neighborhoods, schools and colleges. More wealth will allow people to move to better schools, to send their children to better schools, and to support their college education. Many African-Americans do not have these choices because of a lack of wealth. They then cannot gain the income that would give them and their children the same opportunities as whites have.
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